According to Cointelegraph, the new regulations announced by the IRS on December 27th regard multiple DeFi protocols as brokers and require disclosure of customer transaction information. This regulation may affect up to 875 DeFi brokers.
The new rules sparked widespread opposition on social media, with many legal experts believing that the IRS may have exceeded its authority and violated constitutional rights. Variant Chief Legal Officer Jake Chervinsky called the rules a last-ditch effort by anti-encryption forces and that they needed to be overturned by the courts or a new government.
Alexander Grieve, vice president of Paradigm, said the new pro-crypto Congress should undo the regulations through the CRA process, which allows Congress to review and potentially veto regulations issued by agencies such as the IRS.
Miles Jennings, general counsel at a16z Crypto, called the rule an over-expansion of the term “facilitating transactions” intended to ban DeFi. Miles Fuller, director of government solutions at TaxBit, noted that verification services and wallet software providers were excluded from the definition.
The Blockchain Association called the regulation a last-ditch attempt to push the U.S. crypto industry overseas. Kristin Smith, CEO of the association, said the industry will take aggressive action to fight back and looks forward to working with the new pro-crypto Congress and government to revoke the regulation and other anti-innovation regulations. The IRS expects the new regulation to affect up to 2.6 million taxpayers.
